Up 37% in 12 months: Here's why this fundie still sees value in Woodside shares

The energy producer's earnings could continue to surprise the market.

| More on:
A man in a hard hat puts his finger up to say 'number one' in front of an oil mine

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Woodside share price has soared 37% over the last 12 months to trade at $35.56 today
  • Much of its gains have come amid surging oil prices
  • And that catalyst's longevity could surprise the market, according to Allan Gray fundie Dr Suhas Nayak

The Woodside Energy Group Ltd (ASX: WDS) share price has had a ripper year, lifting 37% over the last 12 months.

Much of its gains have come on the back of surging oil prices. The black liquid's rocketing value saw the energy producer posting whopping earnings last year.

But with oil prices now trading closer to 'normal' levels, does the Woodside share price still represent value?

Experts at Allan Gray think so. Here's why they see even more upside for the S&P/ASX 200 Index (ASX: XJO) oil giant's stock in 2023.

Woodside shares still offer plenty of upside: fundie

The Woodside share price has leapt higher in recent months to trade at $35.565 today, and there could be more gains to come, according to Allan Gray analyst and portfolio manager Dr Suhas Nayak.

He's still bullish on the company which makes up 8% of the Allan Gray Australia Equity Fund, despite the fund trimming its position following last quarter's gains.

Of the company's top spot in the fund, Nayak said, "we're always looking at the upside and the downside, or the payoff profile, of all these stocks", and ASX 200 energy producers still have plenty of payoff potential. He continued:

We still see value in … Woodside in particular.

You're buying these companies … at prices that assume a sub-US$70 oil price, and we're at around US$85.

So, for every year that you see this US$85 oil price, that's a significant level of earnings Woodside and Santos Ltd (ASX: STO) get to have, and shareholders get to benefit from.

Those earnings are said to be capable of sitting at around 5% of Woodside's market capitalisation annually if the oil price stays at around US$85 a barrel – or higher. A likely happening after "years of underinvestment in the energy sector", Nayak says.

The expert isn't alone in his bullish view of the energy commodity. RBC Capital Markets LLC analyst Michael Tran thinks we may have already seen the lowest oil price of 2023, my Fool colleague Bernd reports.

Woodside shares currently trade with a whopping 8.6% dividend yield and a price-to-earnings (P/E) ratio of 7.37, according to CommSec data.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Woman refuelling the gas tank at fuel pump, symbolising the Ampol share price.
Energy Shares

Why is the Ampol share price tumbling 5% on Friday?

The Ampol share price is taking a big fall on Friday.

Read more »

A woman wearing a hard hat holds two sparking wires together as energy surges between them. representing the rising Li-S Energy share price today
Energy Shares

2 ASX energy shares to supercharge your returns

Analysts are tipping big returns from these energy stocks.

Read more »

Two workers at an oil rig discuss operations.
Earnings Results

2 ASX energy shares going gangbusters on today's earnings results

The ASX energy shares are drawing investor interest today after releasing their half-year earnings results.

Read more »

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
Energy Shares

Bell Potter just upgraded this ASX uranium stock

The broker believes recent weakness has created a buying opportunity.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Dividend Investing

Here's everything you need to know about the Woodside dividend

This energy giant is rewarding shareholders with a big dividend again this year.

Read more »

A smiling woman puts fuel into her car at a petrol pump.
Dividend Investing

Looking to bank the record Ampol dividend? Time is running out!

Ampol declared an all-time high final dividend when the ASX 200 energy company reported its full-year results on Monday.

Read more »

Worker at a gas and oil pipeline.
Energy Shares

Woodside share price rises despite 74% decline in FY23 profits

How did this energy giant perform in FY 2023?

Read more »

Worker at a gas and oil pipeline.
Energy Shares

Woodside shares rise on $2.1 billion sale and partnership

Woodside has struck a deal with JERA. Here's what you need to know.

Read more »